FCC Access Ruling Puzzles

Confusion lingers over the impact of the Federal Communications Commission's (FCC) ruling earlier this week that Baby Bells will no longer be required to lease their networks at government-imposed rates to rivals servicing residential customers. The FCC ruled on the issue in a contentious three-to-two decision Wednesday (see FCC Adopts Line-Sharing Rules).

Even though the FCC eliminated some requirements for line-sharing, it decided to keep requirements on incumbent carriers to lease unbundled network elements (UNEs), in this case high-capacity DS1 and DS3 lines, to carriers servicing businesses. And herein lies some of the confusion.

The rules provide new definitions for “impairment,” or the unfair, noncompetitive barriers to entry that competitive carriers face in markets where an incumbent, such as the Baby Bells, owns the infrastructure.

The inability of the incumbent's competitors to use UNEs, specifically mass-market switching, cannot be seen as impairment under the new definitions.

“We are still trying to figure out what it means today,” says Russell Frisby of Competitive Telecommunications Association (CompTel), a trade group representing Bell competitors. “We have heard that 7 percent of the market will be affected, and we have heard 20 percent.”

“But we believe the decision will have a definite and immediate impact,” Frisby says. “It will stop new development and investment in those markets.”

Frisby says his group fears the decision will ultimately hamper “the evolution of alternative IP networks and the deployment of competitive VOIP offerings."

The three Republican commissioners voted to approve the new rules, while the two Democrats voted against them, predicting the rules would raise prices, reduce consumer choice, and cause layoffs.

The new rules aren’t likely to be celebrated by either incumbent or competing carriers. Rather, they are further incremental changes toward a delicate competitive balance that will ultimately benefit consumers, according to the FCC. But in a market this large, billions of dollars are at stake in such “incremental” changes for the carriers and the vendors who sell to them.

FCC Chairman Michael Powell, who has long tried to loosen requirements on incumbent carriers, does not expect the commission’s decision to be popular with either side. “One will undoubtedly hear the tortured hand-wringing by incumbents that they are wrongly being forced to subsidize their competitors,” Powell says.

“Conversely, one can expect to hear the dire predictions of competition’s demise from those [competing carriers] who wanted more,” Powell adds.

Powell says he believes the new rules will foster competition in markets where it is lacking and stand up to the scrutiny of the courts.

Three times in the past eight years the FCC has tried to clarify how, where, and at what cost incumbent carriers (the Baby Bells) must lease portions of their networks to rival carriers (or CLECs) that could not otherwise compete. All three times, the courts have struck down the FCC’s attempts.

Wednesday’s decision was a direct response to a March 2004 decision by the U.S. Court of Appeals for the D.C. Circuit which overturned an earlier set of rulings by the FCC (see Courts Overrule FCC Again ). The Court will review the details of Wednesday’s ruling in January.

— Mark Sullivan, Reporter, Light Reading

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